China should prepare for 'instability' from home-price cooling - editorial

SHANGHAI (Reuters) - Chinese policymakers must ensure the property market, which has started to show signs of cooling, does not become a source of social and financial instability, the official China Daily said in an editorial published on Wednesday.

Investor jitters over the housing market heightened after data showed on Monday house price growth slowed for the first time in 14 months in January, with prices in five cities having a decline on a month-on-month basis.

The news triggered a selloff in shares of property developers and pulled down the overall market on Tuesday to its lowest level in two weeks.

China Daily, noting local media reports about angry homeowners in the southeastern city of Hangzhou protesting offers of deep discounts by some developers, said policymakers also need to be prepared to deal with any social impact that may result from a weaker housing market.

"Chinese policymakers must take measures to prevent house prices from becoming a source of financial instability, and they should prepare as early as possible to deal with the social impact that falling house prices may exert," it said in an English-language editorial.

The editorial added the government has not done enough as a market regulator to avoid conflicts of interest and ensure information disclosure, although it was unreasonable for homeowners to seek compensation from developers when prices decline.

House prices in China have surged in the past year but the market began to show signs of losing momentum at the end of 2013 as local governments, under central government directive, took tightening measures to reduce the risk an asset bubble could form.